Webber v. Dulai Roofing Ltd.

2006 BCCA 501 Webber v. Dulai Roofing Ltd. COURT OF APPEAL FOR BRITISH COLUMBIA Citation: Webber v. Dulai Roofing Ltd., 2006 BCCA 501 Date: 20061109 Docket: CA032791 Between: Martin Webber, Gregory Beck, Walter Beck and Gerda Beck Respondents (Plaintiffs) And Dulai Roofing Ltd. Appellant (Defendant) And Harnek Singh and Bant Jaswant Jhajj Respondents (Defendants) Before: The Honourable Madam Justice Ryan The Honourable Mr. Justice Mackenzie The Honourable Mr. Justice Lowry A. K. Seabrook Counsel for the Appellant L. I. Barron Counsel for the Respondents, Martin Webber, Gregory Beck, Walter Beck and Gerda Beck D. T. Hill Counsel for the Respondent, Harnek Singh Place and Date of Hearing: Vancouver, British Columbia November 1, 2006 Place and Date of Judgment: Vancouver, British Columbia November 9, 2006 Written Reasons by: The Honourable Mr. Justice Lowry Concurred in by: The Honourable Madam Justice Ryan The Honourable Mr. Justice Mackenzie Reasons for Judgment of the Honourable Mr. Justice Lowry: [1] The questions on this appeal are two: whether it is open to the court to cancel the registration of a judgment against the beneficial interest of one of two owners of a piece of property where the proceeds of its sale to which that owner is entitled are insufficient to satisfy the judgment; and whether an award of special costs against the judgment creditor involved in the unusual circumstances of the case can be upheld. [2] The factual circumstances are not in dispute. The property was owned by Harnek Singh, whose registered interest was 99/100, and his brother, Bant Jaswant Jhajj, whose registered interest was 1/100. Dulai Roofing Ltd. obtained a judgment against Jhajj for $16,134.50 which it registered against his interest in the property in accordance with the provisions of the Court Order Enforcement Act, R.S.B.C. 1996, c. 78. Singh and Jhajj subsequently entered into an agreement with Martin Webber and Gregory Beck to sell them the property. Subject to the judgment, the equity of Singh and Jhajj was about $60,000.00. [3] Singh and Jhajj did not complete the transaction because Dulai would not agree to the cancellation of the registration of its judgment against Jhajj's interest in the property, so that clear title could be conveyed, unless the judgment was fully satisfied. It was unwilling to accept the amount that represented Jhajj's interest in the equity, which would have been no more than about $600.00. [4] The purchasers sought the return of their deposit, but that was refused. Ultimately, they (as well as Walter Beck and Gerda Beck, who were to take an interest in the property) commenced this action against Singh and Jhajj for specific performance and damages. They named Dulai as a defendant, although they appear to have had no cause of action against that company and, indeed, pleaded no claim against it. Neither Singh nor Jhajj took any proceedings against Dulai. [5] Mr. Justice Williams disposed of what became the issues in the action on a summary trial that he saw fit to conduct in two parts. The purchasers, Singh, and Dulai all appeared. Jhajj had taken no part in the proceedings and did not appear. Dulai maintained that it was legally entitled to the full satisfaction of its judgment out of the sale proceeds regardless of Jhajj's true interest in the property. In the alternative, it took the position that Jhajj's beneficial interest must be greater than his registered interest such that it was entitled to the amount that was commensurate with whatever his true interest was. [6] The judge rendered two judgments: the first, pronounced orally, 8 December 2003, New Westminster S77687; and the second, written reasons, delivered on 22 February 2005, 2005 BCSC 224. The purchasers' claim for specific performance was not opposed and, in his first judgment, the judge granted the decree they sought and assessed damages against Singh and Jhajj at $12,294.89. He declined to rule on the position taken by Dulai at that time and ordered that Jhajj attend, which he subsequently did, and be examined for discovery [7] The judge further ordered that the registration of Dulai's judgment against Jhajj's interest in the property be cancelled and that $25,000.00 of the proceeds of the sale be paid into court to secure Dulai's claim and the special costs. The judge awarded special costs to the purchasers against each of Singh, Jhajj and Dulai, but deferred any determination of how the costs were to be apportioned between the three. He said: [35] The plaintiffs also claim special costs. They have been frustrated in their endeavours to have their bargain enforced. Fault for that delay and the necessity for the plaintiffs to resort to this action to enforce their contractual rights can be traced to the defendants Singh, Jhajj and Dulai. The specific responsibility cannot be ascertained on the material before me. [36] As indicated, I am not prepared to rule upon the correctness or otherwise of Dulai's position that it is entitled to be paid the full amount of its judgment, notwithstanding that the judgment debtor's equity was nowhere near that amount. That issue will be decided in another phase of this proceeding. Similarly, I am not presently prepared to rule upon the issue of the responsibilities of Messrs. Singh and Jhajj for that situation. [37] I will, however, at this time make an order for special costs against all three defendants. The specifics of the responsibility will be addressed in a subsequent phase of this litigation. [8] In his second judgment, the judge held that, because Dulai could stand in no better position than Jhajj, citing Martin Commercial Fueling Inc. v. Virtanen (1993), 84 B.C.L.R. (2d) 289 (S.C.), aff'd (1997), 31 B.C.L.R. (3d) 69 (C.A.), and that Jhajj's beneficial interest was not shown to be greater than his registered interest, the position Dulai had maintained throughout was without legal or factual foundation and that it was entitled to no more of the sale proceeds than the amount represented by Jhajj's share of the equity. He then proceeded to apportion responsibility for the special costs awarded to the purchasers as follows: Singh 20%, Jhajj 40%, and Dulai 40%. With respect to Dulai, he said: [31] Throughout the entire course of this dispute, both before and after litigation was commenced, Dulai has steadfastly maintained the position that it is entitled to be paid the full amount of the judgment registered against Jhajj's interest, even though it was fully aware when it registered the judgment that Jhajj only possessed a 1/100 legal interest in the property. From a legal standpoint, it maintained this position in the absence of any supporting legislation or case authorities. From a factual standpoint, it maintained this position in the absence of any evidence to indicate that Jhajj's beneficial interest in the property exceeded his legal interest. What Dulai effectively did was hold the transaction between the plaintiffs and Singh/Jhajj hostage in the hopes that it could force the parties to agree to pay out the full amount of the judgment, regardless of whether it was entitled to the full amount of the judgment. The plaintiffs suffered substantially from Dulai's unreasonable conduct and were forced, through no fault of their own, to wait in excess of 14 months before they could take possession of the home they contracted to purchase. [32] Considering the foregoing, the conduct of Dulai in this proceeding can also properly be described as reprehensible within the framework set out in Leung [Leung v. Leung (1993), 77 B.C.L.R. (2d) 314 (S.C.)] and Garcia [Garcia v. Crestbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 (C.A.)] and thus deserving of reproof and rebuke through the imposition of an award of special costs in favour of the plaintiffs. [9] The decree of specific performance the judge saw fit to grant is not challenged on this appeal. [10] With respect to the first of the two questions raised, Dulai accepts that if it had chosen to execute on its judgment, it would have been entitled to no more of the sale proceeds than $600.00, being the value of Jhajj's beneficial interest. However, it maintains that by the court's order it was denied the right it had to remain a judgment creditor for as long as it saw fit in order to take advantage of any increase in the value of the property there may be. Dulai contends that it was not open to the court to cancel the registration of its judgment without such being fully satisfied. It claims to find support for its position in Bank of Montreal v. British Columbia (Registrar, Land Title Office) (1988), 25 B.C.L.R. (2d) 130 (S.C). [11] While counsel would appear to say there is no statutory authorization for the court to cancel the registration of a judgment in circumstances of this kind, I am unable to see why it is not to be found in s. 249 of the Land Title Act, R.S.B.C. 1996, c. 250, which, in material respects, provides: 249 (1) If, in a proceeding pending in the Supreme Court, (a) a question is raised (i) as to the validity of a registered charge, or (ii) as to money owing on or rights respecting a registered charge, and (b) in the opinion of the court, the question raised is sufficiently material for the application of this section, on affidavit or other proof of the good faith of the question raised, the court may, on terms as to security and otherwise it considers proper, order that the registration of the charge be cancelled on payment into court of a specified amount of money by the person claiming relief. Under the Act, a "charge" includes an encumbrance and an "encumbrance" includes a judgment as defined in the Court Order Enforcement Act. [12] It appears to me that the section provides for the jurisdiction the judge required in the circumstances to make an order for the payment into court of the amount of the judgment as well as the cancellation of its registration against the property which had been sold. It could not be suggested that the question raised by Dulai's position was not raised in good faith or that it was sufficiently material to invoke the relief the section provides. [13] In view of this provision of the Act, I do not see what support Dulai is able to take from the authority on which it relies. Bank of Montreal was concerned with a registrar's cancellation of a judgment registered against a property which was set aside. The case has nothing to do with the court's jurisdiction to cancel the registration of a judgment in circumstances such as exist here. [14] With respect to the second question raised on the appeal, the award of special costs, the judge evidently considered that the conduct of each of Singh, Jhajj, and Dulai was reprehensible and deserving of rebuke within the meaning ascribed to those words in Garcia v. Crestbrook Forest Industries Ltd. and Leung v. Leung, which he cited. He relied on three additional authorities for the proposition that careless conduct or conduct amounting to reckless indifference has in some circumstances been said to be reprehensible, justifying an award of special costs: Bank of Credit and Commerce International (Overseas) Ltd. (Liquidator of) v. Akbar, 86 B.C.L.R. (3d) 312, 2001 BCCA 204; Concord Industrial Services Ltd. v. 371773 B.C. Ltd., 17 C.L.R. (3d) 315, 2002 BCSC 900 ¶ 27; and Equus Technologies Inc. v. Sage Automation Corp., 2003 BCSC 1783. [15] It is not necessary to comment on the judge's reasons for awarding special costs against Singh and Jhajj because neither appeals. By saying nothing, I would not, however, wish to be taken to be endorsing the awards made against either. The awards do appear to me to be most unusual in an action where neither defendant opposed the relief that, in the main, was sought by the plaintiffs: specific performance. [16] I consider that the judge erred in principle in awarding special costs against Dulai. [17] In his first judgment, he awarded special costs to the purchasers only on the basis that Singh, Jhajj, and Dulai had caused them expense and inconvenience without stating what conduct it was that was reprehensible. In his second judgment, he allocated 40% of those costs against Dulai when the purchasers had no cause of action against the company. It was merely named as a defendant, apparently because it had registered its judgment against the interest of one of the owners of the property that was the subject of the claim for specific performance. No cause of action was pleaded against Dulai by the purchasers. They made no claim for relief against the company and neither Singh nor Jhajj took any proceedings against it. Dulai did appear and advance its position at both hearings before the judge and its solicitor examined Jhajj for discovery, but I can see no basis in the circumstances for awarding special costs to the purchasers against the judgment creditor. [18] Certainly, the mere fact that Dulai took a position that proved to be legally ill-founded and that it sought to challenge Jhajj's rather unique 1/100 registered interest as being his true beneficial interest was in no way conduct that was reprehensible and deserving of rebuke. The three authorities on which the judge relied in particular speak to the situation where litigants are careless or indifferent with respect to the facts on which they have advanced unmeritorious positions with serious repercussions. The considerations in this case are not the same where, with the benefit of legal advice, Dulai simply took a position that proved not to be sound. There is nothing in its conduct justifying an award of special costs against it. [19] I would allow the appeal to the extent of setting aside the award of special costs against Dulai such that the purchasers will be entitled to tax only 40% of their party and party costs against that company. "The Honourable Mr. Justice Lowry" I agree: "The Honourable Madam Justice Ryan" I agree: "The Honourable Mr. Justice Mackenzie"